US scrap industry eyes southeast Asia as China shuts

The US scrap industry is looking to deepen relationships with buyers in southeast Asia to offset a dramatic drop in volumes to China because of stricter quality standards and tariffs.

US exporters and the Institute of Scrap Recycling Industries (ISRI) will go on a trade mission to southeast Asian countries in March 2020 to foster trade to the region, which has grown in importance in the wake of China's crackdown on scrap imports.

Market participants highlighted Indonesia and Malaysia as two trading partners of particular interest for US exporters during a panel at the ISRI Commodity Roundtables meeting in Chicago yesterday.

Malaysia has jumped as a top destination for US nonferrous exports to make up for some of the lost volumes to China.

US aluminum exports to Malaysia went from 1,000t as recently as 2013 to a record 180,000t in 2018, according to US customs data. They are on pace to eclipse that mark in 2019 at 120,000t through the first seven months of the year.

US copper scrap exports to Malaysia have also shown exponential increases, reaching 120,000t in 2018, up from 5,500t in 2017 and 115t as recently as 2014.

Ferrous exports to Malaysia have also climbed, supported by a government-backed building boom in the country, said Adina Renee Adler, ISRI's assistant vice president of international affairs.

US ferrous scrap exports have rebounded after a swift decline over the last decade. Exports neared 1mn metric tonnes in 2011, but fell as low as 35,000 t/yr from 2015-16. They have since grown back to 500,000t in 2018 and to 486,500t through the first seven months of 2019.

Indonesia has seen similar growth for ferrous imports to support its steel industry, which features at least one large basic-oxygen furnace mill and five electric-arc furnace facilities. Indonesia sources 75pc of its ferrous scrap from overseas, ISRI said.

US exports to Indonesia have followed a similar pattern as Malaysia, bottoming in 2015 at 25,000t but increasing back to 467,000t in 2018 and 200,000t from January-July 2019.

Other destinations show growth potential, but still face challenges.

Nonferrous exports to Indonesia have also picked up. US aluminum scrap exports to Indonesia climbed to 76,000t in 2018, up from 40,000t in 2017 and 7,000t as recently as 2012. Year-to-date exports to the country already total 60,000t. Copper scrap exports grew to 7,000t in 2018, up from 1,100t in 2017.

Nonferrous exports to India, an established market for ferrous exports, have grown but are fundamentally limited by a lack of domestic smelting capacity.

In Latin America, competition with locally-sourced virgin material continues to limit scrap uptake.

And even with other nonferrous scrap markets developing, replacing China's former demand completely remains unfeasible and has led to a natural oversupply in the market.

US aluminum scrap exports to China peaked at 1.45mn t in 2011 and totaled just 495,000t in 2018.

"There is no other China," said Randy Goodman of nonferrous exporter Greenland (America).